Monopoly and Trade Policy

NBER Working Paper No. 3475Issued in October 1990NBER Program(s): ITIIFM

This paper presents a general equilibrium technique for the problem of ranking policies of a nation that trades with a foreign monopoly firm by presenting a generalization of the offer curve. The paper demonstrates the existence of a partial welfare ranking between ad valorem rates and specific rates, and it shows that a minimum import requirement welfare dominates other quantitative policies. The paper proves that a recent policy, the voluntary import expansion, has strongly adverse consequences: when trading with a foreign monopoly firm a nation implementing such a policy will achieve only its autarky level of welfare.